Get Out Of Debt

You see, making a decision about which path to pursue depends on your evaluation of your individual situation.

Bankruptcy:

Pros:

o Chapter 7 Eliminates Debt and allows you to keep any equity in your home. If your problem is primarily consumer debt, this may be the best option for you – if you qualify.

o Chapter 13 restructures debt allowing you to pay off the amount in a way that makes sense for your family.

o Filing for bankruptcy stops the foreclosure action on your home.

o If you lose the home during bankruptcy, you will be able to qualify for a new mortgage in as little as two years as long as you keep your credit clean after discharge.

o Many people find that their credit scores actually rise slightly after bankruptcy because there is new money available for purchases.

Cons:

o Many people who file for Chapter 13 fall out of bankruptcy and lose the court protection provided. This means that they often not only have the bankruptcy on their record, they also face foreclosure proceedings once again.

o If you abuse the system – doing a “face filing” bankruptcy for the sole purpose of delaying the foreclosure, you may face fines from the court.

o Bankruptcy stays on your credit report for ten full years – longer than just about any other negative credit mark.

Foreclosure:

Pros:

o Stays on your record for just 7 years

o Won’t risk falling out of foreclosure and having both a bankruptcy and foreclosure on your record

Cons:

o You lose your home and any equity in it

o Generally cannot get a new mortgage for at least 4 years.

o Possibility of a deficiency judgment against you which will require a bankruptcy filing anyway

Under Florida law, a homeowner’s answer to a foreclosure complaint may include the affirmative defense that the plaintiff lacks legal standing to obtain a judgment of foreclosure.

Because many plaintiffs have no direct relationship with the original lender, they are sometimes unable to produce the original loan and assignment documents that are required of plaintiffs who request judgments of foreclosure. Because many loans were frequently bought and sold by various loan servicers during the past several years, the loan and assignment documents have, in some instances, been misplaced.  This presents an opportunity for homeowners who are trying to stop a foreclosure sale.

The following is an example of how the “standing” defense may be asserted as an affirmative defense in a homeowners answer to foreclosure:

Plaintiff lacks standing to commence this action. My original mortgage was with _______ . This is not the same entity that commenced the instant action. Plaintiff has failed to provide the original, or certified copies of, the note and mortgage and all relevant assignment(s). In Florida, only the owner and holder of the mortgage and the note have standing to commence a foreclosure action.
 
The “legal standing” defense is just one of several affirmative defenses that homeowners should consider when responding to a foreclosure complaint. Other affirmative defenses that a homeowner should consider include; (a) violation of the Truth in Lending Act; (b) Fair Debt Collection Practices Act violations; (c) incorrect notice or service of process; and (d) lost payments.

A homeowner should carefully review the lender’s complaint.  Under the Florida Rules of Civil Procedure, a plaintiff seeking a judgment of foreclosure is required to attach a copy of the Note to its complaint.  A  Florida homeowner who is served with a foreclosure complaint without a a copy of the Note should assert this as a defense.

This may stop the foreclosure action until the lender can supply a copy of the note. In foreclosure actions, any delay in the proceedings can be beneficial because it gives the homeowner an additional opportunity to find alternatives to foreclosure, including a short sale or loan modification. 

In virtually all circumstances, it is beneficial for a homeowner to file an answer when served with a foreclosure summons and complaint.  Failing to answer a foreclosure complaint may result in the forfeiture of the legal defenses that are described above.